CERTYNEX IFRS ACADEMY

A training handout presents four statements about the contractual cash flow (SPPI) test. Which one is wrong?

The principal is the fair value of the asset at initial recognition.

Interest can remunerate other basic lending risks and costs, such as liquidity and holding costs, as well as a margin.

Clauses that expose the cash flows to equity prices do not give rise to SPPI cash flows.

Interest remunerates the time value of money but not the credit risk on the outstanding principal.